Gloria Wright / The Post-StandardThe P&C grocery store in Skaneateles was renovated earlier this year. P&C's parent company, Penn Traffic Co., plans to tell lenders today how it plans to handle its financial woes.
Syracuse, NY -- The parent company of P&C Foods is hours away from telling its lenders how it will continue to stay current on its credit lines after its recent technical default on a loan and its decision to hire a chief restructuring officer.

The Penn Traffic Co., which is based in Syracuse and operates 79 supermarkets in New York, Pennsylvania and New England, is supposed to have a budget in place by Nov. 25, after what it describes as a “technical default” notice from one lender earlier this month.

That lender, General Electric Capital Corp., and other senior creditors agreed to extend credit and letters of credit to Penn Traffic through Nov. 25.

“We continue to work closely with our lenders and appreciate the flexibility that they have provided us with this latest agreement,” Gregory J. Young, Penn Traffic’s president and CEO, said in a statement.

That news, and the announcement that the company has hired a chief restructuring officer, has started rumors swirling about a possible third bankruptcy filing since the 1990s, store closings or a wholesale acquisition or merger by or with another grocery chain.

As a public company, Penn Traffic doesn’t comment on rumors or speculation.

A delay in the ongoing renovation and expansion of P&C’s Manlius store is a construction issue, said Terry Kushner, Penn Traffic’s vice president of sales and advertising.

“As with any kind of home remodeling or store remodeling, there’s a schedule, and this comes up, that comes up,” said Kushner. “It hasn’t met the time frame we had hoped, and we have no projected date for completion.”

Panic within Penn Traffic’s rank and file may be premature and unnecessary, say some supermarket industry analysts.

One of those is Burt P. Flickinger III, managing director of Strategic Resource Group in the New York City area. Flickinger comes from a Western New York grocery family, is familiar with Penn Traffic stores and is a widely respected retail consultant and analyst.

“I was just in a bunch of their stores this weekend, last week and the prior week checking the situation,” said Flickinger. “The stores are doing good business. The promotional program is not as strong as Tops, Price Chopper and other key competitors, and that’s a concern. Plus all the Walmarts opening, the declining New York state population, declining incomes and no increases in food stamps in the federal fiscal year. There’s certainly profit pressure.

“It would make sense to either potentially either recapitalize the company or to consider finding a buyer for the company, given food retail acquisitions appear to be more attractive right now more than other retail acquisitions because of food inflation in 2010 and beyond.”

Flickinger praised Penn Traffic store operations and its top management for building a good base of stores and making smart strategic initiatives.

“But it’s also a company that’s had too much turnover in executive ranks,” said Flickinger. “They could use some outside guidance to consider all the options they have.”

That hiring of an executive from a crisis management firm, the technical default — which the company reported to the federal Securities and Exchange Commission as “alleged overstatements of the value of certain machinery and equipment in the company’s borrowing base certificates” — and the agreement with its senior lenders caused not only talk within Penn Traffic’s company ranks, but the supermarket industry, as well.

The trade publication Supermarket News, citing unnamed sources, said Penn Traffic’s moves are not alarming because the company’s cash flow is good and its balance sheet looks solid.

The source said, however, that “appointing a restructuring officer could hasten an event such as a sale or merger,” according to Supermarket News.

Also recently, Penn Traffic lost its chief financial officer, Tod A. Nestor, who resigned in September to take a similar job with a growing New York City-area supermarket company.

Flickinger said there are logical contenders to sweep up Penn Traffic’s solid store base. Pennsylvania-based Weis supermarkets, which just bought the Giant supermarket chain’s stores in the Binghamton market, is one. Others are Price Chopper; Shoprite; Del Haize USA, the owners of the Hannaford supermarket chain; Giant Eagle out of Pittsburgh; or possibly the SuperValu chain.

Also a contender is Western New York-based Tops Markets, said Flickinger. The president and CEO of Tops, Frank Curci, told The Post-Standard in August that a merger with or acquisition of Penn Traffic might not be out of the question, as both chains operate supermarket chains in contiguous markets.

However, Flickinger said, Penn Traffic’s recent moves could just simply be signaling a recapitalization.

“As long as they have a good store base and a good store leadership team, there’s a good base to rebuild,” said Flickinger. “Penn Traffic, with stability in leadership, should have a viable future. The company may want a financial partner or a strategic partner, but it’s a company with stores being the key cornerstone for consumers. And the stores in many parts of the state are well run.”